Tax Collections for Districts with Chapter 313 Projects (2nd Notice)

This letter is a reminder about a change
in practice for the 2016­–2017 school year regarding tax credits issued under
Texas Education Code (TEC), §42.2515. In
response to a State Auditor’s Office report, beginning with tax year 2016,
school districts that have active agreements under Chapter 313 of the Texas
Property Tax Code and that have companies subject to tax credits must net those
credits against taxes due (rather than the company paying the full amount of
taxes due and the district then issuing a reimbursement to the company for the
amount of the tax credit). This change
in practice will ensure that additional state aid for ad valorem tax credits
under the TEC, §42.2515are issued in compliance with current law. The
first notice, sent in January 2016 so that affected districts could work with their
tax assessor-collectors to prepare for this change, can be found at http://tea.texas.gov/About_TEA/News_and_Multimedia/Correspondence/TAA_Letters/Tax_Collections_for_Districts_with_Chapter_313_Projects/

State Funding

Beginning with the 2016–2017 school year, the Texas
Education Agency (TEA) will no longer accept copies of reimbursement checks from
the district to the company as documentation of the tax credit.

Instead, districts must submit a copy of the company’s tax
statement clearly demonstrating that the tax credit was netted against current taxes
due in order to receive a reimbursement from the TEA.

Accordingly, the criteria for acceptable documentation
as set forth in 19 Texas Administrative Code (TAC) §61.1019 will be updated to
align with statute.

This change in
practice will impact Chapter 42 state aid and Chapter 41 recapture for affected
districts as the tax collections used in state funding calculations will now be
net of the tax credit.

The definition of tax collections in 19 TAC §105.1 will also be updated to align with the change in practice.

Direct questions related to required documentation for
ad valorem tax credits to Nancy Kuhn at (512) 463-6313 or at nancy.kuhn@tea.texas.gov.

Financial
Reporting

Beginning with the 2016–2017 school year, tax
collections reported on the tax information survey (through the Foundation
School Program system in the TEASE) should be net of these tax credits.

Beginning with the 2016–2017 school year, tax
collections reported on the Schedule of
Delinquent Taxes Receivable (Exhibit J-1) as part of the annual financial
report (AFR) should be net of these tax credits.

The AFR format template for Exhibit J-1 in the Financial Accountability System Resource Guide
will be updated accordingly to exclude the Chapter 313 tax credits from the
district’s reported tax collections.

Direct questions related to tax collection reporting in
the AFR to Paul Moreno at (512) 475-2228 or at paul.moreno@tea.texas.gov.